Hartford Life Insurance Co. agreed to issue credits totaling $24 million to about 30,000 customers of accidental death and dismemberment services, Benjamin Lawsky, superintendent of the New York Department of Financial Services announced today.
The company will provide premium credits to currently insured individuals in the form of a 35% discount for 36 months and also agreed to reduce premium rates for existing and new enrollees by 45%.These aggregate credits will equal $24 million, so the action does not result in a payout.
At issue is the medical loss ratio (MLR) threshold required under New York law.
Hartford will issue the credits because it didn’t comply with the 60% MLR required under New York law for plans such as the company’s accidental death and dismemberment (ADD) coverage, according to the DFS.
The period in question predates Lawsky's stewardship. A review conducted by the New York State Insurance Department for the period January, 2007 through December, 2010, revealed that The Hartford did not achieve the 60% loss ratio as provided in 11 NYCRR 59.5(b), according to the stipulation.
“Hartford reported the lower than required MLR to the Department of Financial Services (DFS) and has submitted a corrective action plan,” the Superintendent stated.
The DFS said that Hartford had failed to meet the 60% level because it overestimated the amount of money that would be spent to pay claims when the policies were priced by the insurer. This actuarial miscalculation can of course go both ways.
The policies in question were sold via telemarketing and other forms of mass marketing targeted to members of associations and customers of banks and other financial institutions.
"We worked closely with the New York Department of Financial Services throughout the review to determine an appropriate corrective action. We are pleased the matter is resolved," The Hartford said in a statement.
Hartford chose to resolve the matter with a stipulation and plan rather than a hearing.
The Patient Protection and Affordable Care Act (PPACA) covers the MLR in comprehensive health care plans, of which The Hartford's ADD coverage is not included. It is considered long term care.
Separately, but still with regard to Lawsky's scrutiny of premium rates, the New York DFS said in February it was stepping up its examination of health insurance premium rates, saying it has launched a broad probe into the accuracy of the data used by insurers and health maintenance organizations to request rate increases.
Insurers will not know beforehand whether their proposals will be the subject of an audit, Lawsky stated.
Data regarding claims, insurer administrative expenses, premiums and claims reserves will be examined. The Department will hire a private accounting firm to assist DFS personnel in conducting the audits.
The audit is being financed through a $4.4 million grant won by the DFS in September from the U.S. Department of Health and Human Services.